Scary post - is it true?

[BibiMac]

Hi, just read a thread elsewhere on the forums in which one of the posters said that if you have your personal bank accounts with the same bank as your business account and your business is in trouble, you should move your personal accounts as the bank will transfer money from your personal account to cover the money you owe them?

Is this true - can they do this? Is it legal?

We have an authorised (unsecured) overdraft on our business account for a limited company. Both my business partner and I have our personal accounts with the same bank. We hope to pay off the overdraft when we close the business, but may go into liquidation before we can do this.

Has anyone experience this happening? Need to know whether I should be making some swift changes...

thanks!
Abby

[OldWelshGuy]

Ltd co is a different matter, as they are a separate entity in law from an individual.

[Zeno]

Are you sure your overdraft is unsecured? This would be pretty unusual in this day & age. You have not given a personal guarantee for instance?

If so, it is possible that the bank could do this (regardless of if they are allowed to or not).

[BibiMac]

It's definitely unsecured - only £10k so not massive in the grand scheme of things - it was set up by a friendly business banking manager a few years ago, so before the banking crisis.

Sadly he's no longer there so we have a very unfriendly bank manager now (may have something to do with our being continually overdrawn).

So they definitely can't touch our personal money without breaking the law?

thanks
abby

[OldWelshGuy]

Oh they can take it, and often do, you then have to fight to get it back.

Do you have the original overdraft agreement, if not then get a copy as unsecured can also mean that you have personally guaranteed the loan, in which case they can grab your personal money.

Why not just move your personal accounts?

[Zeno]

It's definitely unsecured - only £10k so not massive in the grand scheme of things - it was set up by a friendly business banking manager a few years ago, so before the banking crisis.

Sadly he's no longer there so we have a very unfriendly bank manager now (may have something to do with our being continually overdrawn).

So they definitely can't touch our personal money without breaking the law?

thanks
abby

No, but I would make absolutely certain that you have no given an sort of guarantee. Even a £10k unsecured overdraft is pretty rare these days and even back two or three years ago.

It would not be over cautious to have a check of the paperwork. You may also like to check the register of charges at Companies House.

[KM-Tiger]

Is this true - can they do this? Is it legal?

That might have been a post by me.

This came up when reviewing some bank legal docs with a solicitor who pointed out that one of the clauses we were about to sign up to meant that the bank reserved the right to move money from one account to another as they saw fit, and by signing, we were agreeing to give them that right.

The solicitor pointed out that he keeps his business account, client account and his personal account in three entirely separate banks exactly to avoid this possibility, however unlikely it would seem in his case.

The answer will be in the fine print of whatever you have signed. If in doubt get a solicitor to review, as I recall that the wording was a lot less than clear to any normal person.

[elainec100@cheapaccounting]

clear to any normal person.

So a solicitor is not normal then :D:D:D

[BibiMac]

It would not be over cautious to have a check of the paperwork. You may also like to check the register of charges at Companies House.

Thanks for the tips.

My business partner is digging out the paperwork tonight - we're both pretty sure we didn't sign up for any personal guarantees (it was set up in 2005 and it was definitely a lot easier to borrow money then) but want to check the small print for anything sneaky.

I've checked and there aren't any charges registered against our company, so that's good.

I could (and may still) transfer my personal accounts, but have joint accounts etc. as well to think about so would rather not, however I think my take out from these replies is that it would be a recommended course of action regardless of whether we have personal guarantees or not?

Thanks again
abby

[Zeno]

Thanks for the tips.

My business partner is digging out the paperwork tonight - we're both pretty sure we didn't sign up for any personal guarantees (it was set up in 2005 and it was definitely a lot easier to borrow money then) but want to check the small print for anything sneaky.

I've checked and there aren't any charges registered against our company, so that's good.

I could (and may still) transfer my personal accounts, but have joint accounts etc. as well to think about so would rather not, however I think my take out from these replies is that it would be a recommended course of action regardless of whether we have personal guarantees or not?

Thanks again
abby

Please not that a personal guarantee would not show on the register of charges. It does show that the bank has no floating charge over the company assets or security over any property.

Even in 2005, it was easier to borrow money but not unsecured. You may have been lucky and it has fallen through the cracks though. The major banks have been looking for security over all borrowings (even £250 credit card limits) for some time now.

[yorkshirejames]

Oh they can take it, and often do, you then have to fight to get it back.

Do you have the original overdraft agreement, if not then get a copy as unsecured can also mean that you have personally guaranteed the loan, in which case they can grab your personal money.

Why not just move your personal accounts?

All seconded.

[Dominic Taylor]

Are you sure you're not acting as a personal guarantor? I had to sign one of these for a loan - not really sure why as they asked for bugger all proof I could actually pay it (totally bizarre) - but then that was pre-crisis for you...